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1) Is Return on Investment same as Return on Assets? There are so many different definition in books so I am now confused...

2) Is ROA = Profit before taxes/Total Assets or Profit after taxes/Total Assets

3) I know to find ROI for some investment or project, but is it possible to find ROI for company from income statement and balance sheet?

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    $\begingroup$ I'm voting to close this question as off-topic because it is an accounting question and not an economics one. While I believe that accounting should be on topic, and have opened up a meta question (meta.economics.stackexchange.com/questions/1526/…) to change things, it currently is off topic. $\endgroup$
    – BKay
    Apr 4, 2016 at 12:50
  • $\begingroup$ assets are something you or somebody else owns, an investment is something where you or somebody else have/has put capital to work (often with an exit strategy and a fixed timeframe). If you go to your bank and ask for a loan they might ask you for your assets as security which is worth more than an investment as security because the equity is at hand and can be easily liquidated $\endgroup$
    – Aurigae
    Apr 5, 2016 at 2:31

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  1. No.

Return on assets = net income/assets.

ROI = an informal term roughly corresponding to return on starting capital, or net income/starting capital. Starting capital is any money invested in the business.

Let's say you take out a 500k mortgage on a home with a 50k downpayment. That means 550k of assets. Net of everything you make a $10000 profit from rental income or whatever.

Your ROA is 10k/550k because even though you don't own the home free and clear, the house is still an asset.

ROI is a more informal term comparing how much you invested versus the return. In this example ROI is 10k/50k because you only paid 50k for the home.

  1. ROA uses net income, which means after tax.
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  • $\begingroup$ I know to find ROI for some investment or project, but is it possible to find ROI for company from income statement and balance sheet? $\endgroup$ Apr 4, 2016 at 2:18
  • $\begingroup$ You can find ROI for anything because it isn't a formally defined term. The closest equivalent is return on starting capital, which is not on the balance sheet. $\endgroup$
    – D J Sims
    Apr 4, 2016 at 2:20

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